No one has been immune to the challenges of the remodeling market the last several years, but Marrokal Design & Remodeling has weathered the storm better than most other firms.
With a strong focus on marketing and sales combined with smart management, San Diego-based Marrokal has maintained profitability even as revenues dipped in 2009 before rebounding this year. Because of that success and the way the management team has positioned the company for the next generation of leadership, Marrokal is our Remodeler of the Year.
Reading the market
Even as the company was having it’s two highest-revenue years up to that point in 2007 and 2008, there was a recognition that the good times weren’t going to last forever.
“As we have grown over the years, we do get to know when a recession is going to happen,” says company founder and CEO Gary Marrokal. “I knew it was coming around because we had a strong six, seven years. No one knew it would be this bad.”
The Marrokal management team knew that the competition for leads was going to get tougher and drastically increased spending on marketing beginning in 2007. At the same time, they didn’t want to just “take money and fling it out there,” Marrokal says. There had to be a plan.
The first step of that plan was to change the name of the company from Marrokal Construction to Marrokal Design & Remodeling to better emphasize the company’s design/build remodeling focus.
“With that we brought in a marketing consultant to help us change the image of the company because we realized our clients were more sophisticated,” says COO Lori Bryan.
The company logo was redesigned and rethought, replacing a blocky “Marrokal Construction” with a script “M” and the company’s new name. The consultant and the Marrokal team chose the colors and style to better appeal to women, who they knew made most of the design decisions. The new look was carried through every printed piece the company produces as well as on the website.
Once that was done, the company increased its presence in local media – print, television and radio – as well as in-person marketing through local concerts, festivals and neighborhood events. Marrokal also reached out to past clients going back 30 years to keep in touch with them.
“We knew we had to focus on marketing, leads and sales,” Marrokal says. “And you’ve got to be aggressive. There are companies that did the opposite and you can’t do that.”
Spending time and money on marketing is something Gary Marrokal has done since the day he started the company with a $3,000 loan in 1981. He immediately spent $2,000 prepaying for advertising to get a better rate from local newspapers.
Just like it did 30 years ago, that aggressiveness has paid off today. In 2009, the company had 200 more leads than in 2008. For its 2010 fiscal year (which ended in September), the company had 100 more leads than 2009. And even with an average job size that has dropped from $217,000 to $131,000 over the last few years, Marrokal had its second-highest revenue year in 2010.
Refined and refocused
The refocused marketing efforts succeeded in bring in more leads, but getting the leads was only half the battle. Getting those clients to sign on became increasingly challenging, especially after the stock market crash in fall 2008.
“There was definitely this weird, uncomfortable uncertainty,” says senior design consultant Steve Walton, who has been selling for Marrokal for 13 years. The company has had to become more flexible and more accommodating of clients to make the sale, providing more ideas, solutions and design choices.
“What it came down to was accommodating their design needs in a more fluid way, doing some things we typically wouldn’t do,” Walton says. “For example, we typically don’t do anything for the client in a design direction without a retainer. Those first few months we did, just to keep things going.”
While the company has stepped away from that, the expectations from clients are still higher in the design stage even now, requiring more time and effort from the design staff.
“A lot more graphic representation is necessary to pique people’s interest,” says director of design John Davies. “Everybody’s a little shy, particularly when you’re talking about a big project. The more that we show them up front, the more comfortable they get.”
It wasn’t only the attitude of the clients that proved an issue in the wake of the financial market crash. The challenges of selling in that climate left many of the design consultants discouraged.
“Everybody around them said the sky was falling,” Marrokal says.
The design consultants felt pressure to decrease margins and make other concessions to sell jobs, a slippery slope that the management team knew could quickly eat into the company’s profits. It was a constant topic at the sales meetings, which Marrokal still leads himself, in 2009. The company leadership provided additional sales coaching and continued to emphasize that the company only needed to work for a relatively small portion of the population, a group that was still fairly well off.
“The bottom line is that after a few months, they didn’t want to talk about that anymore,” Marrokal says. “And our clients, 96 percent of them are still working and they’re not as concerned about their jobs as they were a year ago, so they’ve come around.”
And while the climate isn’t great, it has settled to a point that Marrokal believes the company can continue to be successful.
“I think the economy we have right now is the economy we’re going to have for the next five years,” he says. “If it can stay like this, I’m OK with that.”
Differentiation by design
Perhaps the biggest reason Marrokal has been able to differentiate itself from the competition is the company’s strong focus on design. The firm has invested heavily in a design center and a talented design staff to make it stand out in the San Diego remodeling market.
The design center, which opened in spring 2003, is not a traditional showroom. Instead, it’s a working design studio where clients can come in, see the designers at work and meet the staff. While there are a few small vignettes, product selection is secondary.
“It’s really a client center,” says Davies, who was brought on board to run the center. “A design consultant can bring a client through and show them the entire process from actual design concepts being formulated to the drafting department, all the way through the final design and everything in between.”
The experience is so different from that at most remodeling firms, that it instantly adds value in people’s minds, Davies says.
The design center was Walton’s brain child. He came up with the idea as a way to emphasize the Marrokal design advantage. Gary Marrokal liked the idea and told Walton to investigate it further.
“That’s one of the things that sets us apart,” Walton says. “Gary trusts the team members to contribute on large conceptual ideas.”
The Marrokal design staff – which includes architects and ASID-certified interior designers – is one of the biggest advantages the company has, Davies says.
“I’d put our design team up against anybody in town who does residential work,” he says. “It’s all done in one line – the interior design is integrated from the beginning, the architecture is integrated from the beginning. We’re all on the same team, so there’s a great value in that.”
Strong trade relationships
Stand-out design is, of course, only part of a successful project. Executing it in the field falls to the production managers and a team of excellent trade contractors.
Long ago, Marrokal made the decision to use trade contractors to perform labor instead of in-house staff, first supervising all jobs himself, then bringing on current director of production Bruce Howard as a project manager in 1987.
“Trade contractors are the key to our whole business model, really,” Howard says. “It’s much more efficient to run a trade contractor-based company. We know our costs. We can produce a job faster. We probably produce the jobs faster than any remodeler in our area.”
Most of the company’s trade contractors have been working with Marrokal for years and know the high standards Howard and his project managers expect. Trades are graded and evaluated and will be dropped if they don’t keep jobsites clean or communicate well with homeowners, for example.
“We go to great lengths to keep our trades. If there’s a problem, I would try to … figure out why they’re failing and give them an opportunity to fix it,” Howard says. “If they can’t fix it, we just cleanse them out of the system and move to somebody else. We are only as good as the people that we send to work at somebody’s home everyday.”
The company expects a lot from its trades, but also treats them well, Howard says. Marrokal pays well and pays quickly and hosts an annual dinner for trades and their employees.
“Most of our trade contractors are small, so they don’t have time to be chasing the money,” Howard says. “To a small contractor that can be deadly.”
Time of transition
Gary Marrokal is quick to point out that the success of Marrokal Design & Remodeling is more about the team he has working for him than it is about him.
For the last several years, Marrokal has been taking more time off from day-to-day operations of the company, leaving that role to Bryan, Howard and Davies. The talented senior leadership team has allowed him to spend weeks away from the office at his vacation home in central coast California and elsewhere.
“When I am gone, they know I have the confidence that they’ll make the right decisions,” Marrokal says. “We have things that come up and over the years, they’ve handled those things and I don’t have to get involved.”
The latest change is handing off even more control to Bryan, who was recently promoted to COO and will be taking over Marrokal’s management of the sales team.
“For the most part, he’s only as involved as he wants to remain involved,” Bryan says. “We have an open, good working relationship that will help us through this next transition.”
Marrokal and his wife are still the sole owners of the company, but he has begun putting in place a transition plan that would allow his senior management to take ownership stakes. In the meantime, Marrokal’s reduced role also benefits the company in another way.
“He has a bird’s eye view because he’s not involved in the day-to-day anymore,” Bryan says. “We have this person who intimately understands the industry and the business but he has the time to think where he’s not encumbered by the day-to-day.”